The government has turned down at least 15 names for the post of independent directors in various Central Public Sector Undertakings (CPSEs) under the Heavy Industries Ministry.
“After following all due process, the Ministry sent over 15-16 names to the competent authority in the last one year. However, not a single name has been accepted. Now we have been asked to get new names vetted by the newly appointed screening committee,” a senior Government official told BusinessLine .
There are 38 independent director vacancies in various CPSEs under the Heavy Industries Ministry. This includes six vacancies in BHEL and its subsidiary BHEL Electricals Machines Ltd.
An independent director does not have a material or pecuniary relationship with a company or related persons, except sitting fees. Independent directors do not own shares in the company. Their role is critical from the point of view of corporate governance. In fact, SEBI norms prescribe that independent directors must comprise at least one-third of the board’s strength.
The proposals for appointment of independent directors are initiated by the administrative ministries/departments concerned by recommending names of at least three eligible persons for each position. A search committee forwards the name to the Appointment Committee of Cabinet (ACC) for final approval.
The administrative ministry/department appoints the non-official directors on the basis of recommendations of the search committee after obtaining the approval of the appointments committee.
The difficulty in filling up positions of independent directors is not restricted only to CPSEs under the Heavy Industries Ministry. In the recently concluded Monsoon Session of Parliament, the government informed the Lok Sabha that there are around 530 vacant positions of such directors in 182 scheduled CPSEs – both listed and unlisted.
Among the 50 listed companies, according to Prime Database, 38 have either less than the required number or no independent directors at all.
In fact, the issue is not just a delay in fresh appointments, but also the ‘unceremonious’ removal of independent directors appointed by the previous government.
Earlier, this week, former ONGC Chief RS Sharma raised this question in a letter to the Prime Minister.
After retirement, Sharma was appointed independent director on the board of SAIL by the previous government, but the proposal was rejected by shareholders (with majority of government) in the annual general meeting held during the present regime.